Readying a Patent Portfolio for Sale

In years gone by, companies with extensive patent portfolios were loathe to sell these assets, strongly preferring to license them.  These Patent Licensing Agreements (PLA) came in several flavors, most had some form of royalty payments for the licensor and the fundamental was that ownership of the patents remained with the original owner, i.e., the company granted the patent(s).

While not totally different today, much has changed in the disposition of thousands of US patents.  Patents are now sold in much greater numbers than in decades past.  Some of the reasons for this are:

·         Corporate decision to shut down or sell of an operating division

·         Near term need to financially rescue another part of the corporation

·         Shift in corporate direction/strategy

·         Pay a court imposed penalty

Patent sales are now so commonplace that online IP reporter sites like www.IAM.com recently devoted a webinar to the patent selling process.  This process, as one can see, includes seven steps.  The assumption here is that the seller completed a validity check to the extent possible on each patent offered for sale. 

It is noteworthy under Step 6 that the biggest buyers of patents review around 1,000 seller packages per year.  This clearly puts the onus on the seller to develop a first class patent package.  It also suggests that this is a buyers’ market putting more of a burden on the seller to find ways to get the most value for its assets.

Keywords: patent, patent portfolio, licensing, PLA, Patent Licensing Agreement, commercialization. 

ARM Holdings is giving up their "holding" to Sprint/SoftBank

ARM Holdings, the maker of chips and chip making technology has week a favorite here at IPZine. They are basically an IP company holding lots of patents on lots of stuff. They specialize in energy-efficient, reduced instruction set (RISC) chip technology; build it and then license it out to chip makers.
They have really taken off into the work of the Internet of Things.
Today SoftBank (parent of Sprint) has offered to by ARMH in an all cash bid. The stock is up 50% today. Even at this elevated price, the price-to-earnings ratio is 70!. Compare that to Intel (INTC) with a paltry PE of 15. Profit margin of 35% vs 20% for INTC.
ARM has remained independent and resisted the various take-over pressures. Until now. This changes somewhat the ARM dynamic of licensing tech to multiple players and making lots of money from licensing revenues (nearly pure profit). ARM has focused on tools and R&D and left the heavy work of manufacturing, distribution, etc. to their clients.
This is probably a good time to start getting out of the stock; SoftBand (Sprint) is not nearly the same type of investment. Sprint is more of a utility play, not R&D.
The drop in British Pound has made ARMH a far better deal to acquire. (ARMH is UK based.)
On a separate note, SoftBank's interests in buying up chip makers might become more complicated with ARM Holdings, in the company's holdings.
In the end, the independence of ARM Holdings didn't hold.

Supreme Court Brings back Treble Damages - WSJ

Supreme Court Makes It Easier for Patent Holders to Win More in Damages - WSJ:

The unanimous ruling by the Supreme Court brings back the serious damages -- up to 3 times -- for willful patent infringement. Recent lower court rulings were making it virtually impossible to go after big, treble-the-losses, damages. That is the BIG STICK in patent infringement cases. Some companies strategy is to just keep infringing and simply let the lawyers do the heavy lifting. Smaller companies often do not have the resources to fight, especially if it becomes long and protracted.

The threat of treble damages, kind of keeps every honest, usually. Take that away and infringement becomes much less risky.

One of the first options for a patent holder is to enjoin the infringer from producing and selling. This can take some time; the patent claims are always contested, etc., etc. Fortunately, the USPTO has improved this process of patent review so that the strength and quality of the patent can be established early on.

Of course, one end result of infringement is a licencing agreement. However, someone who will infringe your patent, might also go to great lengths to avoid giving an accurate count of the units sold and the royalties payable.

During all this time, the infringing company is trying to develop a work-around so that they can continue selling the products but avoid the infringement. Market build, product established.

If the patent has not yet been issued, the game is even more convoluted.

On the flip side of treble damages is the patent troll (NPE). One would hope that judges would evaluate the case of a troll company that simply sits on a pile of patents with no intentions of producing any actual products and takes a toll off of any and all commerce in the industries/products where their patented technologies apply.

*** Update below on June 17, 2016. ***

An excellent Legal-centric focus of this ruling comes form Dennis Crouch at Patently-O. He also discusses "willful" and suggests that "egregious infringement" might be the new standard going forward.

From a more business perspective, Joff Wild at IAM-media offered some interesting insights about the Halo ruling. He noted that Justice Roberts gave us the first official definition of "Patent Trolls", there s also a discussion of "efficient infringer", and this ruling obviously is a great step forward for patent owners, but a small, first-step.

'via Blog this'

Revenue Per Patent A Longstanding Question of Value for Many

In the world of IP, there is a list of questions that never seem to be answered to the satisfaction of all particularly when there is generational change in who is running the corporation.  Foremost among the questions is what is the revenue per patent and is it worth the time, energy and resources that must be applied not only for a patent but protect in the marketplace from infringement that may result in costly litigation.  IAM presents 20 corporations with extensive patent portfolios and the revenues per patent at  http://www.iam-media.com/blog/detail.aspx?g=d37195bc-4870-406d-81cc-f9e74c6e17b8.  Among the points worth noting is that Apple has the least number of patents among the 20, but blows all away in the revenue it realizes for each patent.

All of those listed make sizable revenues.  It is clear that the effort to patent from beginning to end is of demonstrable value to the corporation.

IP Monetization Yearbook from IAMmagazine.

Intellectual Asset Management magazine (http://www.iam-magazine.com/Intelligence/IP-Monetisation-Yearbook/2013) publishes a set of reports each year.  One is the "IP Monetization Yearbook."  The 2014 issue has 11 articles- one of which is Monetization of Royalties and Revenue Streams.  As the techniques for monetization of the enterprise's asset leader, IP, mature, the ways in which to monetize it should evolve to keep pace.  Here, the subject is the multiple ways in which to monetize royalties and other revenue sources from the IP portfolio.

As with most things, there are risks as well as benefits.  This makes due diligence and risk assessment mandatory.  A sample of the risk factors:
-  Revenue stream sensitivity to changes in consumer preferences
-  Technological, product or market obsolescence
-  Infringement risks
-  Risk of invalid IP

These factors potentially impact royalty interest purchases, IP securitization, multiple licenses, etc.

The article summarizes the basic structure of the licensing techniques, the pros and cons, the advantages and disadvantages.  What the article does not explore are the internal demands on the enterprise to develop the business strategies and revenue potentials against other internal revenue sources. (Product Management)  These licensing techniques  have much in common with a financial line of business requiring sophisticated financial plans.  This is not your IP Father's Patent Licensing Agreement from decades ago.

Already, IP Law and corporate finance are seated at the table.  Business Development and Strategic Planning need to join along with IP business managers.  And, once the royalty agreements are implemented, someone will have to manage the royalty collection and certification processes.

What organization in the enterprise owns these license agreements?

Control of IP on Business Side of Corporation

There's a key point in this IAM magazine article by Joff Wild in the July 9, 2014, issue.  Note that the Chief IP Officer is not an attorney- he a business professional.  This is a significant change, a recognition that commercialization of Intellectual Property in a marketed product, a Patent Licensing Agreement with Royalties, a technology transfer or an outright patent sale is a business decision, not a legal one.  In some companies going back nearly 50 years, (AT&T, IBM, DuPont, Xerox to name a few) the decisions on IP were made by the business side.  But, for most, it has only been since the late 1980s that brought the marked change from predominantly physical assets in a corporation to intellectual assets that has prompted more and more corporations to view IP as a key revenue generator that has a place in the strategic plan.  The business development organization would be an appropriate place for decisions on IP revenue generation.

The belief that our patent system is broken is patently false | freep.com ... Broken as designed?

The belief that our patent system is broken is patently false (guest column) | Detroit Free Press | freep.com:

This is a very interesting article by David Kappos (IP attorney and director of the USPTO). Intellectual Property, especially patents, is a critical foundation of the US economy and of our entrepreneurial proficiency.

But we shouldn't take it for granted.

That's why some of the IP, Hi-Tech companies have joined together into an American alliance of innovation: Partnership for American Innovation  http://partnershipforamericaninnovation.org/.

Companies need to take advantage of IP and use it aggressively both domestically and abroad. Especially if we are in the US where we do have strong rule of (IP) law. We must avoid allowing countries with lax IP laws to overrun us on our own strengths, our strengths to innovate.

We need to aim for Perpetual Innovation(tm). Hall & Hinkelman talk about Perpetual Innovation(tm) in their 2013 book on Patent Commercialization argue that many companies are broken-as-designed. They are not designed around managing their intellectual assets; they still operate as if most of their assets and most of their value comes from physical assets.

The US Patent system may not be broken, but many companies are. And IP is a critical part of all innovation and the pipeline of new products.

Hall, E. B. & Hinkelman, R. M. (2013). Perpetual Innovation™: A guide to strategic planning,
patent commercialization and enduring competitive advantage, Version 2.0.
Morrisville, NC: LuLu Press. Retrieved from: http://www.lulu.com/spotlight/SBPlan

Hall, E. B. & Hinkelman, R. M. (2013). Perpetual Innovation™: Patent primer 2.0:
Patents, the great equalizer of our time! An overview of intellectual property
with patenting cost estimates for inventors and entrepreneurs.  Morrisville, NC: LuLu Press. Retrieved from: http://www.lulu.com/spotlight/SBPlan
(or Kindle at http://tinyURL.com/IPPrimer2) 

'via Blog this'

These Aren’t The Patent Trolls You’re Looking For | TechCrunch

These Aren’t The Patent Trolls You’re Looking For | TechCrunch:

Wow this is a great analysis/discussion of Patent Trolls.

This is a great discussion of the companies that exercise their IP rights and ways in which they do so. IBM invents a lot (patents) but doesn't directly utilize most of their inventions directly. Plus, even if they do, they often have peripheral uses of the technology where licensing out is a great way to commercialize.

As we often tell clients, you can license key technologies -- especially exclusive licensing for your product -- to control the market.  You don't actually have to invent it.

Kravets does not necessarily propose mechanisms to address "ethical" commercialization from the "unethical" patent trolls.

Maybe that is his next article?

'via Blog this'

Strategic Business Planning Co's Books and Publications Spotlight

Strategic Business Planning Co's Books and Publications Spotlight:

Here's the Patent Primer as well.
Also check out the e-book versions of the book/booklet.

Perpetual Innovation: A Patent Primer, an Overview of Patenting Issues and Costs Estimates for a Small Entity

By Elmer Hall, Robert Hinkelman

View this Author's Spotlight

Paperback, 25 Pages 

Preview

Price: $10.05

Ships in 3-5 business days

This booklet is a overview of intellectual property protection in the US and globally. This is what’s missing from the books on new product development and do-it-yourself patenting. It’s not covered in the business books on product development, marketing and strategic planning. With so much depending on the intellectual property protection of inventors they must have a good understanding of the information presented here to be successful. This booklet is what everyone needs before launching into new product development and invention commercialization. It gives a quick overview of the patenting process. It addresses the timing of various patent-protection maneuvers. There is an example of costs for a small entity/investor to bring an invention to market-readiness with patent protection. This booklet is based on Appendix B of Perpetual Innovation: A Guide to Strategic Planning, Patent Commercialization and Enduring Competitive Advantage (2007) by Hall and Hinkelman.

'via Blog this'

Strategic Business Planning Co's Books and Publications Spotlight

Strategic Business Planning Co's Books and Publications Spotlight:

The patent commercialization books by Hall and Hinkelman are available from LuLu Press: http://www.lulu.com/spotlight/SBPlan

Perpetual Innovation: A Guide to Strategic Planning, Patent Commercialization and Enduring Competitive Advantage

By Elmer B. Hall, Robert M. Hinkelman

View this Author's Spotlight

Paperback, 288 Pages 

Preview

Price: $49.95

Ships in 3-5 business days

Perpetual Innovation describes the strategic planning process necessary for managers and inventors to bringing protected technologies to market. This book outlines the ways to organize for innovation and how best to commercialize intellectual property (patents) nationally and internationally. Valuation and decision-making methods are presented for assessing the value of technology at early stages and preparing for the best methods of value realization. Key to market success is being first to market, with a superior product and the best possible intellectual property protection. This book focuses on the business side of patent commercialization, those decisions that involve everyone in the organization, not just the patent attorneys and the scientists.

'via Blog this'